Northwestern Equipment, Inc. v. Cudmore

• Decision Date: 12 November 1981
• Docket Number: No. 9981,9981
• Citation: 312 N.W.2d 347
• Parties: 33 UCC Rep.Serv. 160 NORTHWESTERN EQUIPMENT, INC., Plaintiff and Appellant, v. Clayton CUDMORE, individually, and d/b/a Cudmore Gravel Supply, Defendant andAppellee. Civ.
• Court: North Dakota Supreme Court

Page 347

312 N.W.2d 347

33 UCC Rep.Serv. 160

NORTHWESTERN EQUIPMENT, INC., Plaintiff and Appellant, v. Clayton CUDMORE, individually, and d/b/a Cudmore Gravel Supply, Defendant andAppellee.

Civ. No. 9981.

Supreme Court of North Dakota.

Nov. 12, 1981.

Richie, Sogard & Carlson, Fargo, for plaintiff and appellant; argued by Jay D. Carlson, Fargo.

Albert Frederick Arnason, Grand Forks, for defendant and appellee.

PAULSON, Justice.

Northwestern Equipment ("Northwestern") appeals from the judgment of the district court of Walsh County entered on March 19, 1981, which dismissed Northwestern's cause of action against Clayton Cudmore and awarded damages of $3,641.23 to Cudmore on a counterclaim. We reverse.

Clayton Cudmore owns and operates Cudmore Gravel Supply in Park River, North Dakota. In early June of 1978, Dean Cudmore, son of Clayton Cudmore and an employee of Cudmore Gravel Supply, telephoned Northwestern regarding problems he was having with an International TD-25B bulldozer owned by the company. After describing the problem, Dean Cudmore was advised by Northwestern to remove the transmission from the bulldozer and to send it to Northwestern's repair shop in Fargo. The transmission was brought to Fargo and Northwestern repaired it. The transmission was then returned to Cudmore Gravel, and Dean Cudmore reinstalled it in the bulldozer. When the bulldozer still failed to work, Dean Cudmore again telephoned Northwestern, and was directed to send the torque converter from the bulldozer to Fargo for repairs. The torque converter was transported to Fargo and Northwestern repaired it. The torque converter was returned to Cudmore Gravel Supply, and Dean Cudmore re-installed it.

When the bulldozer still failed to function, Dean Cudmore again telephoned Northwestern. Lloyd Durbin, a field service mechanic for Northwestern, was dispatched to Cudmore Gravel Supply. He examined the bulldozer and determined that the problem was due to a faulty hydraulic control box. He removed the control box and returned to Northwestern's Fargo shop to rebuild it. Approximately one week later, he returned to Cudmore Gravel Supply and installed the rebuilt control box. Upon completing the repairs, Durbin operated the bulldozer for approximately one hour. At trial, he testified that the bulldozer was fully operational at that time and that the transmission and torque converter were operating within the manufacturer's recommended specifications.

The bulldozer subsequently developed further problems, and the evidence indicates that the machine failed to operate at full capacity. When Clayton Cudmore discontinued payments on his account with Northwestern, Northwestern brought this action to collect the balance due for the repairs, $1,247.77. Cudmore counterclaimed for the amounts he had already paid on the repairs and for expenses incurred in renting substitute equipment, alleging that Northwestern had been negligent in repairing the bulldozer and had breached an implied warranty of fitness for a particular purpose. The action was tried to the court without a jury, and the district court entered judgment for Cudmore on his counterclaim in the amount of $3,641.23, concluding that Northwestern had been negligent in repairing the bulldozer and had breached the implied warranty of fitness for a particular purpose contained in Section 41-02-32 of the North Dakota Century Code.

Northwestern has presented three issues which will be dispositive of this case on appeal.

I. Is the implied warranty of fitness for particular purpose provided for in Section 41-02-32, NDCC, applicable in the instant case?

II. Is the non-sale of goods implied warranty of fitness for particular purpose, which this court has applied to construction contracts, applicable to a contract for the repair of used equipment?

III. Were the trial court's findings that Northwestern had been negligent in making repairs and had breached an implied warranty of fitness for particular purpose clearly erroneous?

I.

The first question presented is whether or not the implied warranty of fitness for particular purpose contained in Section 41-02-32, NDCC (UCC § 2-315), applies to a contract for the replacement of parts and repair of a transmission in a used bulldozer. ¹ However, before this warranty can be applied to the facts of this case, we must determine if the contract between Northwestern and Cudmore Gravel Supply falls within the coverage of Chapter 41-02 of the North Dakota Century Code (Article 2 of the Uniform Commercial Code).

Section 41-02-02 (UCC § 2-102) provides that "this chapter applies to transactions in goods." The contract between Northwestern and Cudmore Gravel Supply was for the rendition of services and for the sale of necessary parts. Thus, the contract is a "mixed" contract, for both goods and services. The applicability of Chapter 41-02, NDCC, to mixed goods and services contracts was discussed by this court in Air Heaters, Inc. v. Johnson Electric, Inc., 258 N.W.2d 649 (N.D.1977). In Air Heaters, we adopted the test espoused by the United States Court of Appeals for the Eighth Circuit in Bonebrake v. Cox, 499 F.2d 951 (8th Cir. 1974). The Bonebrake court enunciated the following test to be applied to mixed goods and services contracts:

"The test for inclusion or exclusion is not whether they are mixed, but, granting that they are mixed, whether their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of service, with goods incidentally involved (e. g., contract with artist for painting ...) or is a transaction of sale, with labor incidentally involved (e. g., installation of a water heater in a bathroom ...)." Bonebrake, supra, 499 F.2d at 960. (Footnotes omitted.)

As we noted in Air Heaters, with the adoption of the Bonebrake test it becomes necessary in cases involving mixed goods and services contracts to determine "whether their predominant factor, their thrust, their purpose reasonably stated is the rendition of service, with goods incidentally involved, or is a transaction of sale, with labor incidentally involved." Air Heaters, supra, 258 N.W.2d at 652. Thus, in the instant case we must determine whether the predominant factor, thrust, and purpose of the contract between Northwestern and Cudmore Gravel Supply was the rendition of services, with goods incidentally involved, or was a transaction of sale, with labor incidentally involved.

On two previous occasions we have confronted the issue of the applicability of Chapter 41-02, NDCC, to mixed goods and services contracts. In Air Heaters, the plaintiff had contracted with the defendant to design, manufacture, and install a complete electrical system in a new addition to the plaintiff's plant. Three years after the work had been completed, a fire destroyed a substantial part of the plaintiff's property, and plaintiff sued for negligence, breach of warranty, and strict liability in tort. On appeal, this court concluded that there was insufficient factual data in the record regarding the nature of the contract to determine whether the primary factor and thrust of the contract was the sale of goods or the rendition of services. Thus, we concluded that the plaintiff had failed to meet its burden of establishing that the contract involved a sale of goods so as to come under the provisions of Chapter 41-02, NDCC, and we held that the implied warranties contained in Chapter 41-02 were inapplicable.

More recently, in Robertson Companies, Inc. v. Kenner, 311 N.W.2d 194 (N.D.1981), we again applied the Bonebrake test to a mixed goods and services contract. In Robertson, the contract involved the sale of two galvanized steel buildings. The contract required the plaintiff to "provide, deliver, and erect" the two buildings. We held that the main purpose of the contract was clearly the sale of grain storage facilities, and therefore Chapter 41-02, NDCC, was applicable.

In the instant case, Cudmore contends that the primary purpose and thrust of the contract was the sale of the parts, because the amount charged by Northwestern for the necessary parts was greater than the amount charged for labor. ² Although the amount charged for goods and services, respectively, may be a factor to be considered in determining the predominant thrust and purpose of the contract, it is not by itself a clear indication of what the parties considered the predominant purpose. The Bonebrake test looks to the predominant purpose or thrust of the contract as it would exist in the minds of reasonable parties. Meyers v. Henderson Construction Co., 147 N.J.Super. 77, 370 A.2d 547, 550 (1977). In the instant case the parties have demonstrated their intent that the contract's primary purpose was the repair of the bulldozer, with the necessary parts merely incidental to the services performed. For example, Cudmore's answer and counterclaim to Northwestern's complaint clearly indicates that the primary concern of the parties was the repair work performed, not the parts supplied. In its counterclaim, Cudmore alleged that "Defendant delivered a certain transmission from a piece of Defendant's equipment for the purpose of repairing it"; "the repair of Defendant's transmission was in the exclusive judgment, control, and management of plaintiff's employees and Defendant was required to rely exclusively on the judgment of Plaintiff's employees"; "Plaintiff's employees were negligent in repairing said transmission." (Emphasis added.)

Additionally, during the cross-examination of Ernest Jensen, Northwestern's service manager, counsel for Cudmore elicited testimony that the contract was for repair of the transmission, with parts "as needed" as determined by Northwestern:

"Q (by Mr. Arnason) Now, you have people in your shop that are mechanics properly trained in transmission work?

"A Yes, we have them, yes.

"Q I show you part of Plaintiff's Exhibit 1, and it looks like a repair order and is signed by Larry...